LULU reports after the close today … I have been keeping an eye on this stock lately and I am thinking any bearish news from this earnings report could see LULU become a pretty decent bearish short position for me. Here are the charts …
LULU – Daily Chart
To me the daily chart looks like one that is ripe to see price start to head lower … the price chart is in a bearish position – price itself is below its 20SMA; the 20SMA is below its signal line, and the ATRs are in a position of resistance.
The poor price performance of NKE since its earnings gives me more confidence that if the market doesn’t like what it hears today after the close, then we could get multiple days of a leaking stock price.
LULU – Weekly Chart
LULU – Monthly Chart
The bigger time frame charts are less bearish, so LULU may not be in any serious trouble here. The weekly chart shows that price is below its 10SMA but the 10SMA is still above its signal line (barely!!).
The monthly chart has broken its ATR support so that is what makes me a little more suspicious of the weekly chart’s bullish signals (ATR is a position of support). If the monthly chart has in fact made an important pivot high, then this bounce on the weekly time frame is just a bounce and the fact that price broke above the weekly ATR is nothing but a false signal.
More chopping may be necessary, but if LULU bounces after their earnings today, I will pay more attention for a possible spot over the next couple of weeks to try and start a long dated bearish option position in LULU. If price starts to weaken here after earnings, I think an outright short position will be a good risk/reward trade.
Cheers … Leaf_West